With US stocks outperforming non-US stocks in recent years, some investors have again turned their attention towards the role that global diversification plays in their portfolios.
While non-US equities have recently delivered disappointing results, it is important to remember that investing globally provides valuable diversification benefits.
Have a look at the chart below. We see that investors who had exposure to other areas of the global landscape were rewarded with positive returns. Cumulative performance from January 2000 – December 2019 reflects the benefits of having a globally diversified portfolio, especially a portfolio that targets areas of the market with higher expected returns. Longer time frames increase the likelihood of having a positive investment experience.
|Total Cumulative Return (%)2||2000-2009||2010-2019||2000-2019|
|S&P 500 Index||-9.10||256.66||224.33|
|MSCI World ex USA Index (net div.)||17.47||67.89||97.22|
|MSCI World ex USA Value Index (net div.)||48.71||48.79||121.27|
|MSCI World ex USA Small Cap Index (net div.)||94.33||116.76||321.24|
|MSCI Emerging Markets Index (net div.)||154.28||43.50||264.91|
|MSCI Emerging Markets Value Index (net div.)||212.72||22.83||284.13|
Diversification neither assures a profit nor guarantees against loss in a declining market.